1

Chapter 1THE PROBLEM AND ITS BACKGROUNDIntroductionCash is considered as the lifeblood of all business establishments,whether small, medium or large in scale, it is the most vital asset which providesthe basis of its life. It should be managed efficiently to support the growth andfinancial strength of the business, with sufficient cash a business has the abilityto buy almost any of the other resources.Due to its vitality, cash management can be crucial and difficult up to apoint in which every decision can affect the business in a great degree. It is a keycomponent of ensuring a business stability and solvency. If at any time, abusiness fails to pay an obligation when its due, the business is insolvent whichthe primary reason why businesses go bankrupt. This is the reason why goodmanagement of cash is required in running a business. Successfully managingcash is an essential skill for small business developers because they typicallyhave less access to affordable credit and have significant amount of upfrontcosts they need to manage while waiting for receivables. Cash managementinvolves a broad area of financing which includes the collection, handling, andusage of cash. Wisely managing cash enables a business to meet unexpectedexpenses in addition to handling regularly-occurring events.

Cash management therefore, is a challenging and difficult task, due to the

fact that the life of the business hangs in the balance, which is why businessowners need to manage their cash efficiently; they also need keep track of everymovement of money received or spent, as well as the changes in theirenvironment.We chose this matter as the subject for this study in order to gain moreknowledge on how to manage cash more effectively in order to help other peoplewho lack knowledge about cash management.Successful cash management involves not only avoiding insolvency, butalso reducing days in account receivables, increasing collection rates, selectingappropriate short term investment vehicles, and increasing days in cash on hand,all in order to improve the business overall stability and financial profitability.Background of the StudySince the 1990s, there has been a resurgence of interest on the role ofsmall scale business enterprises in the Philippines, in national and internationaleconomic and social development. Small scale businesses are vital to thesuccess of the economy. Not only as they provide the success stories of thefuture, but also because they meet local needs (e.g. hairdresser, financialconsultant, and emergency plumber). This is consistent with the overall shift ofdevelopment strategies in many countries toward a more decentralized, evenlocalized, approach. As such, many scholars, practitioners, and institutionsinvolved in economic development have begun to recognize the important roles

that smaller-scale business entities play in the economy and society. More andmore people are becoming convinced that these entities can be a very effectivemeans of achieving, not only economic progress, but social goals as well. All ofthese suggest a greater need to increase our understanding of the nature andcapabilities of small scale businesses in their cash management practices as wellas the common problems that they encounter. Some of the common problems asmall scale business owner faces are miscalculations and wrong allocation ofcash resulting in shortages and failure to meet necessary obligations.Literature ReviewBabil (2012) cited that cash management means the management ofliquidity in order to meet their day-to-day commitment.Tonen (2007) the researcher stated that it is reasonable to expect that therole of financial transactions in the cash management process in adding to firmvalue has increased its importance and change the cash management behaviorof firms.Pandey (2007) Cash is the important current asset for the operations ofthe business which is the basic input needed to keep the business running on acontinuous basis: it is also the ultimate output expected to be realized by sellingthe service or product manufactured by the firm. The firm should keep sufficientcash, neither more nor less. Cash shortage will disrupt the firm's manufacturingoperations while excessive cash will simply remain idle without contributing

anything towards the firm's profitability. Thus, a major function of the financialmanager is to maintain a Sound cash position.Isidro (2015) shared her views on the importance of cash. She stated thatCash flow is an essential ingredient to the survival of your small business. It isthe flow of money in and out of your small business, and the quantity as well astiming of that flow is critical to the continued operation of your business.Cash helps your business purchase items it needs to produce productsand services for profit, thereby helping your business to generate more cash forits operation. If customers are slow to pay or your pricing structure does notadequately cover the cost of production, your business will not have enough cashto continue operation. Even if your business is turning in a profit, you can still beforced to close if your business runs out of cash!Laudato (2013) stated that cash management offers a great deal ofimportance in operating business. The business will not survive if the financemanager does not know how to handle cash effectively.She also mentioned in her study that the cash management is theplanning, controlling and accounting of cash transactions and cash balances.Because the cash move so readily between bank accounts and financial assets,cash management really means the management of all the resources.According to Gitman (2006), You need to understand the differencebetween strategic and operating plans, and the role of each; the importance of

focusing on the firms cash flows; and how use of pro forma statements can headoff trouble for the firm.Tennet (2012) mentioned in his book, of all the resources cash isprobably the most important. With sufficient cash a business has the ability tobuy almost any other resources in which it may be deficient.Richardson (2005) stated that cash management is the movement offunds through financial institutions to optimize liquidity. It is the management ofcorporate funds to increase interest income earned by maximizing investmentsand/or reducing interest paid by minimizing borrowings.He also mentioned that cash management is a financial discipline thatuses the same principles, regardless of the type of business, size or age of anenterprise.Cash management is not an accounting function. The accountant recordsand reports transactions historically; the cash manager plans and executes thesefinancial transactions. Cash managers use techniques, products and services toefficiently manage cash resources and satisfactorily resolve cash shortagessurpluses.Morgan (2005) mentioned in his book that cash is one of your mostimportant assets and should be managed efficiently to support your growth andfinancial strength.Ward (2013) stated that cash flow management is the process ofmonitoring, analyzing, and adjusting their business cash flows.

According to the study conducted by Leung (2005), cash plays a vital rolein a companys operation. It is used to pay wages and salaries, trade debts,taxes and dividends. It not only enables the company to promptly pay itscreditors and suppliers so as to foster good relations but also lets the companytake advantage of favorable business opportunities. Most importantly, it keepsthe company liquid and prevents it from insolvency or bankruptcy. He alsomentioned the objectives of cash management: (a) to have sufficient cash foroperation in order to maintain liquidity; and (b) to invest excess cash for a return.It was also mentioned that cash is the most active item on theaccounting statements. The movement of cash completes almost all purchasesand sales transactions. Purchases of goods and services normally results in cashpayments; sales normally result in cash receipts. Cash more than any otherasset, is the item involved in business transactions. This is due to the nature ofthe business transactions which include a price and condition calling forsettlement in terms of the medium of exchange.In striking contrast to the activity of cash is its unproductive nature. Sincecash is the measure of value, it cannot expand or grow unless it is converted intosome other properties. Excessive cash balances of cash on hand are oftenreferred to as idle cash. Efficient cash management requires that available cashbe continuously working in one of several ways for example, as part of theoperating cycle or as a short term or long term investment because of the highvalue of money in relation to its mass, its easy transferability, and other obviouscharacteristics, it is the asset most susceptible to improper diversion and used by

employees. In addition, a great many transactions either directly or indirectly

affect its receipt or payment. It is therefore essential that cash be effectivelysafeguarded by the special controls.Waltson et al (2007), explained that cash management as the conceptwhich is concerned with optimizing the amount of cash available, maximizing theinterest earned by spare funds not required immediately and reducing lossescaused by delays in the transmission of funds.According to Davidson et al, (2005), cash is any medium of exchange,which is immediately negotiable. It must be free of restriction for any businesspurpose. Cash has to meet the prime requirements of general acceptability andavailability for instant use in purchasing and payment of debt. Acceptability to abank for deposit is a common test applied to cash items. This is a process ofPlanning, controlling, and accounting for cash transactions and cash balances. Itis channeling available cash into expenditures that enhance productivity, directlyor indirectly.Team FME (2013) cited in their book that management of cash flow isone part of a larger management responsibility known as the management ofworking capital, which refers to the operating liquidity available to anorganization.According to Zimmerer et al (2008) cash management is the process offorecasting, collecting, disbursing, investing, and planning for cash a companyneeds to operate smoothly. They further added that cash management is a vital

task because it is the most important yet least productive asset that a smallbusiness owns. A business must have enough cash to meet its obligations or itwill be declared bankrupt. Creditors, employees and lenders expect to be paid ontime and cash is the required medium of exchange, however, some firms retainan excessive amount of cash to meet any unexpected circumstances that mightarise. These dormant cash have an income-earning potential that owners areignoring and this restricts a firms growth and lowers its profitability. Investingcash, even for a short time, can add to companys earning. Proper cashmanagement permits the owner to adequately meet cash demands of thebusiness, avoid retaining unnecessarily large cash balances and stretch the profitgenerating power of each dollar the business owns.Cash management is particularly important for new and growingbusinesses. Davidson et al, (2005) indicated in their book that cash flow can bea problem even when a small business has numerous clients, offers a superiorproduct to its customers, and enjoys a sterling reputation in its industry.Companies suffering from cash flow problems have no margin of safety in caseof unanticipated expenses. They also may experience trouble in finding the fundsfor innovation or expansion. Finally, poor cash flow makes it difficult to hire andretain good employees.Cash management has four major functions; determination of minimumcash balances, effective borrowing, advantageous investment of excess cash,and acceleration of cash flow.

The minimum cash balance is established by taking into consideration the

basic safety cushion needed, minimum bank balance requirements, and the rateof daily cash collections and disbursements. Cash balances should bemaintained at the lowest practical minimum because excess cash earns nothingand loses purchasing power in period of rising prices.Hofstrand, (2013) said that cash flow statement is one of the mostimportant financial statements for a project or business. The statement can be assimple as a one page analysis or may involve several schedules that feedinformation into a central statement. It is a listing of the flows of cash into and outof the business or project.Sardakis (2007) stated that it is very important to have efficient andeffective liquidity management for the survival of the business, especially forsmaller ones.Westerfield et al, (2007) noted that it is important to distinguish betweentrue cash management and a more general subject of liquidity management. Thedistinction is a source of confusion because the word cash is used in practice intwo different ways.First, it has its literal meanings, actual cash on hand. However, financialmanagers frequently use the word to describe a firm's holdings of cash alongwith its marketable securities, and marketable securities are sometimes calledcash equivalents or near cash. In our distinction between liquidity managementand cash management is straightforward, they added.

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Woodward et al, (2007) Cash flow accounting involves the reporting of

classified list of last years cash flows, and a set of forecast cash flows, withsupporting analysis of the variances between last years actual and forecast cashflows. It therefore emphasizes the most fundamental events in businessactivities, cash flows into and out of the firm, and the segregation of past (cash)facts from future estimates, accounting time period allocation, based onestimates of consumption are avoided.Kasilo, (2005) Cash flows from operations are the amount of cash a firmgenerates in a measured time from its operation. Various methods are used todetermine the amount of operating cash flow. The prevalent methods use theincome statement and the balance sheet to prepare the cash flow statement(also called statement of sources and application of funds).Hampton (2006) stated that cash is the money which a firm can disburseimmediately without any restriction. The term cash includes coins, currency andchecks held by the firm, and balances in its bank accounts. Sometimes nearcash items, such as marketable securities or bank times deposits, are alsoincluded in cash. The basic characteristic of near-cash assets is that they canreadily be converted into cash. Generally, when a firm has excess cash, it investsit in marketable securities. This kind of investment contributes some profit to thefirm.

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Theoretical FrameworkIn financial theory, researchers will be interested in how cash and otherliquid assets affect firm value and the optimal capital structure of a firm. Cashmanagement is expected to play a key role in creating stockholder value. That iswhy it is important to find new evidence of cash management behavioraldimensions that cause the creation or destruction of shareholder value. Morris(1983) integrated operating cash flow activities into the risk and returnframework. In this statement, the cash management policy of the firm willassume to be of the Miller and Orr type. Sartoris and Hill (1983) integrated shortrun cash inflows and outflows into the net present value model. They haveshowed that the changes in cash management policies have a direct effect onthe value of the firm.The Miller and Orr model of cash management is one of the various cashmanagement models in operation. It is an important cash management model aswell. It helps the present day companies to manage their cash while taking intoconsideration the fluctuations in daily cash flow.As per the Miller and Orr model of cash management the companies lettheir cash balance move within two limits - the upper limit and the lower limit. Thecompanies buy or sell the marketable securities only if the cash balance is equalto any one of these.When the cash balances of a company touches the upper limit it purchases acertain number of saleable securities that helps them to come back to the desired

12

level. If the cash balance of the company reaches the lower level then thecompany trades its saleable securities and gathers enough cash to fix theproblem.It is normally assumed in such cases that the average value of thedistribution of net cash flows is zero. It is also understood that the distribution ofnet cash flows has a standard deviation. The Miller and Orr model of cashmanagement also assumes that distribution of cash flows is normal.

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Conceptual FrameworkThe conceptual framework showed the scope and direction of the study.The paradigm consisted of two frames which showed the independent variable inthe left, which is the business profile of the respondents, and the second one inthe right showed the dependent variable, cash management in selected smallscale business establishments in Pangil, Laguna. The lines connecting the twoframes showed the relationships that exist among variables.Independent Variable

Figure 1. The conceptual paradigm showing the interplay of the variables of

the study.

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Statement of the Problem

The study was conducted to investigate all aspects of cash managementpractices of selected small scale businesses in Pangil, Laguna.Specifically, this study aimed to answer the following questions:1. What is the business profile of the respondents in terms of: Form of Business Nature of the Business Years of Existence Average Monthly Profit Starting Capital2. What are the common problems encountered by small scale businesses incash management?3. What are the levels of cash management practices in term of :a. Forecastingb. Receivingc. Disbursingd. Controllinge. Investing4. Is there a significant relationship between the common problems encounteredand the levels of cash management practices?

Research HypothesisH0 There is no significant relationship between the common problemsencountered and the levels of cash management practices.Significance of the Study

15

The study tried to determine the methods used by business owners in

handling cash that could be of great help in running a business more efficientlyand effectively.As to Teachers. To provide additional information about the importance ofcash management and how it affects the business that they can apply in theireveryday lives.As to the Community. To help them realize the importance as well as theeffects of wisely managing cash in their day-to-day lives.As to Students. To help them to become more aware of the importance ofcurrency, to make them realize and appreciate the value of handling cashefficiently that could be of great help in shaping their future.As to Future Researchers. This study can be the basis for futureresearch works and may be a source for related literature.As to the School. The Laguna Maritime Arts and Business Colleges canuse the results and recommendations to improve the curriculum for the BusinessAdministration Department.Scope and Limitation of the StudyThe study was limited only to the registered small scale businesseslocated in Pangil, Laguna. The study was conducted in the year from 2015 up to2016. The researchers utilized descriptive research.Definition of Terms

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To have better understanding of the texts which were used in this study,the researchers defined the following terms:Cash. refers to money in the form of coins and bills as distinct from moneyorders or credit.Cash Management. refers to the way in which a person or organizationmanages money.Small Scale businesses. refers to businesses in Pangil, Laguna with lessthan 500 employees and had a starting capital of not more than 5 million pesos.Forecasting. refers to the prediction of future developments, anestimation of what is likely to happen in the future, especially in cashmanagement for the selected small scale business establishments in Pangil,Laguna.Receiving. refers to the acquisition of cash by the selected small scalebusiness establishments in Pangil, Laguna.Disbursing. refers to the paying out of money of the selected small scalebusiness establishments in Pangil, Laguna.Controlling. The act of managing cash by the selected small scalebusiness establishments in Pangil, Laguna.Investing. The act of using cash in order to buy something, especially onethat will be used by the business for a long time.

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Chapter 2RESEARCH DESIGN AND METHODOLOGYThis chapter presented the research design, research procedure,respondents of the study, sampling techniques, research instruments, andstatistical tools that were used in the study.Research DesignThe researchers employed descriptive method of research in describingand presenting the results of this study entitled Cash Management practices ofselected small scale business establishments in Pangil, Laguna.The descriptive method included techniques that were used to summarize anddescribe numerical data for the purpose of easier interpretation (Kazmier, 2004).Respondents of the StudyThe respondents of the study were the registered business establishmentsthat were classified as micro to small scale in selected areas in Pangil, Laguna.The researchers chose a total of 10 respondents for the investigation.Sampling TechniquesQuota sampling was chosen as the sampling technique. This samplingtechnique is useful when time is limited, a sampling frame is not available, theresearch budget is very tight or when detailed accuracy is not important.

Gantt chart

Activity Description

Gathering data for

chapters 1 & 2

Construction of theliterature review

Construction of thequestionnaire

Academic Year 2015-2016

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

5 Colloquium6

Distribution ofquestionnaires

Analysis andinterpretation of data.

Final checking and

editing

9 Final DefenseFigure 2 below showed the Gantt chart of the study. The preparation for thestudy lasted for ten (10) months which started from gathering the necessary datafor the construction of chapters 1 and 2 up to final defense.

Figure 2. Gantt chart of the study.

Budgetary Requirements

The table below showed the budgetary requirements of the researchers

while conducting the research. The required amount was P 800.00 and it wasallocated for transportation expenses, computer rentals for research and editing,for printing and photocopying of questionnaire and hard copies of the researchand expenses for documentation.The budgetary requirements of the studyExpenses

Estimated cost

Transportation

P 100.00

Computer rentals

P 350.00

Printing and photocopying

P 250.00

Other expenses

P 100.00Total

P 800.00

Data Gathering Procedures

Participants were informed about the nature and purpose of the study andthe confidentiality and non-trace-ability from the questionnaire response.Participants were asked to answer the questions and give their opinions asfrankly as they could as it was crucial to the meeting of success of the study.Once the questionnaires have been completed and collected, the researchershad gone through the data and analyzed the information received.Research Instruments

The questionnaire was divided into functional areas as follows: Part I

contained the business profile of the respondents in term of the form and natureof their business, the years of the business existence, average monthly profitand the starting capital. Part II contained the common problems encountered andpart III contained statement about the levels of cash management practices interm of forecasting, receiving, disbursing, controlling and investing.Scale

Range Interval

Verbal Interpretation

4.51 5.00

Always

3.51 4.50

Oftentimes

2.51 3.50

Sometimes

1.51 2.50

Seldom

1.00 - 1.50

Never

Statistical ToolsThe data that were gathered in this study were treated statistically. Variedstatistical tools were employed for the resulting data in different parts of thisresearch instrument. The researchers utilized percentage, weighted mean, andchi-square to treat the following variables.STATISTICAL TOOLSVariable1. Demographic profile of thebusiness

2. Common problems encountered

Weighted mean, Rank

4. Relationship between the common

problems encountered and the levels ofcash management practices

Chi-Square

Chapter 3PRESENTATION, ANALYSIS, AND INTERPRETATION OF DATAThis chapter presents, analyzes, and interprets the data gathered todetermine the relationship between the common problems encountered and thelevels of cash management practices.The findings are presented in the same order as outlined in the statementof the problem discussed in chapter 1.1. Business Profile of the RespondentsAll the respondents in this study are categorized into micro to small scalebusiness. Their business profiles are explained further in this study.Table 1: Form of BusinessForm of business

Frequency

Percentage

Rank

Sole Proprietorship

90%

Partnership

10%

Total

10

100%

Table 1 shows the form of the business of the respondents. Ninety percent of the respondents, with a frequency of nine, and ranked as first, wereengaged in sole proprietorship and only ten per cent, with a frequency of one,which was ranked as second, was engaged in partnership. Sole proprietorshipform of business was more common among the respondents.Table 2: Nature of the BusinessNature of thebusiness

Frequency

Percentage

Rank

Retailing

40%

Manufacturing

10%

Service

50%

Total

10

100%

Table 2 shows the nature of the business of the respondents. Fifty percent of the respondents, with a frequency of five, and ranked as first, wereengaged in service, forty per cent, with a frequency of four, which was ranked assecond, were engaged in retailing and only ten per cent, with a frequency of one,and ranked as third, was engaged in manufacturing. Most of the respondentswere engaged in service.Table 3: Years in existenceYears in existence

Frequency

Percentage

Rank

less than 5

30%

5 - 10 years

50%

11 - 20 years

10%

3.5

21 and above

10%

3.5

Total

10

100%

Table 3 shows the length of time the business of the respondents hasexisted. Fifty per cent of the respondents, with a frequency of five, and rankedas first, have been in business for 5 - 10 years, thirty per cent

of the

respondents, with a frequency of three, and ranked as second, have been

operating for less than 5 years, ten per cent have been existing for 11 - 20 yearsand another ten per cent are operating for more than 21 years, both with afrequency of one and ranked as last. Most of the respondents have been inbusiness for 5 - 10 years.Table 4: Average monthly profitAverage MonthlyProfit

Frequency

Percentage

Rank

Less than P 10,000

30%

P 10,001 - 25,000

50%

P 25,001 - 40,000

10%

3.5

P 55,001 and above

10%

3.5

Total

10

100%

Table 4 shows the average monthly profit of the respondents. Five of therespondents, with the percentage of fifty, ranked as one, have a monthly profit

between P 10,000 - 25,000. Three of the respondents, with the percentage of

thirty and ranked as second, have a monthly profit of less than P 10,000. One ofthe respondents, with the percentage of ten, has a monthly profit between P25,000 - 40,000, another ten per cent of the respondents, with a frequency ofone, has a monthly profit of P 55,001 and above. Both are ranked as last.Table 5: Starting capitalStarting capital

Frequency

Percentage

Rank

Less than P 50,000

90%

P50,001 - 500,000

10%

Total

10

100%

Table 5 shows the amount of starting capital of each respondent. Ninety

per cent of the respondents, with a frequency of nine, had a staring capital of lessthan 50,000 and only ten per cent of the respondents, with a frequency of one,had a starting capital between P50,001 - 500,000.

2. Common problems encountered in cash management

Common problemsencountered

WeightedMean

Verbal Interpretation Rank

Not enough cash for emergency

expenses

2.3

Seldom

Miscalculations

1.7

Seldom

8.5

Wrong allocation of cash

1.7

Seldom

8.5

Seldom

6.5

Cash overages

2.5

Sometimes

Cash shortages

2.4

Seldom

Seldom

6.5

Poor decisions in handling cash.

2.9

Sometimes

Huge overhead costs

2.1

Seldom

Seldom

6.5

2.16

Seldom

Not enough cash for necessary

obligations

Not enough cash to buy

necessary equipment.

Problems in collecting receivables

Average weighted mean

Table 6: Common problems encountered in cash management

Table 6 presents the common problems that the respondents encountered

when managing their cash. With a weighted mean of 2.9, and ranked as first,the most common problem that the respondents encounter when managing theircash was having poor decisions. With a weighted mean of 1.7, the respondentsleast encounter having miscalculations and wrong allocations of cash, both areranked as last.3. Cash management practicesTable 7: Cash management practices in term of Forecasting

Forecasting

WeightedMean

VerbalInterpretation

Rank

Experiencing poor decisions in

handling cash.

2.9

Sometimes

Experiencing unexpectedexpenses.

3.2

Sometimes

Have enough cash allocated

for emergency and unexpectedexpenses.

3.5

Sometimes

Have no cash allocated for

emergency and unexpectedexpenses.

2.3

Seldom

Experiencing miscalculationsand wrong allocation of cash.

1.7

Seldom

Average weighted mean

2.72

Sometimes

Table 7 presents the levels of cash management practices of the

respondents in term of forecasting. With a weighted mean of 3.5 and ranked asfirst, the respondents sometimes have enough cash allocated for emergency andunexpected expenses. With a weighted mean of 1.7 and ranked as last, therespondents seldom experiences miscalculations and wrong allocation of cash.Table 8: Cash management practices in term of ReceivingWeightedMean

VerbalInterpretation

Rank

Double checks the amount

received.

4.7

Always

Issues receipts upon receiving

cash.

2.9

Sometimes

Promptly checks if the amount in

the receipt is correct.

3.4

Sometimes

Records the cash received

immediately in the financialsystem.

3.7

Oftentimes

Puts the cash immediately in

different drawers to establishaccountability.

3.9

Oftentimes

Average weighted mean

3.72

Oftentimes

Receiving

Table 8 shows the levels of cash management practices of the

respondents in term of receiving cash. With a weighted mean of 4.7 and rankedas first, the respondents always double check the amount that they receive. On

the other hand, with a weighted mean of 2.9 and ranked as last, therespondents only issues receipts upon receiving cash occasionally.

Table 9 : Cash management practices in term of Disbursing

Disbursing

WeightedMean

VerbalInterpretation

Rank

Pays bills and other utilities before

due to avoid any penalties,interests, or other charges.

4.5

Oftentimes

1.5

Pays loans, notes, and other short

or long term borrowings beforedue to avoid any penalties andother interests.

4.5

Oftentimes

1.5

Issues loans, notes and other

short or long term borrowings.

Sometimes

Have enough cash to meet

obligations.

Oftentimes

Have not enough cash to meet

obligations.

2.1

Seldom

Average weighted mean

3.62

Oftentimes

Table 9 shows the levels of cash management practices by the

respondents in term of disbursing cash. With same weighted mean of 4.5 andboth ranked as first, the respondents often pay their bills and other utilities, aswell as their notes and other short or long term loans to avoid any interests or

penalties. However, with a weighted mean of 2.1, the respondents seldom

experiences having not enough cash to meet their necessary obligations.

Table 10: Cash management practices in term of Controlling

WeightedMean

VerbalInterpretation

Rank

The owner withdraws its capital

for personal use.

Seldom

Provides separate cash drawers

to establish accountability.

Oftentimes

Records cash overages in the

financial system.

4.2

Oftentimes

Records cash shortages in the

financial system.

3.4

Sometimes

Records daily cash

disbursements.

4.6

Always

Average weighted mean

3.64

Oftentimes

CM Practices : Controlling

Table 10 shows the levels of cash management practices by the

respondents in term of controlling. With a weighted mean of 4.6 and ranked asfirst, the respondents always record their daily cash disbursements. On the otherhand, with a weighted mean of 2 and being last in the ranking, the respondentsseldom withdraw the business capital for personal use.

Table 11 : Cash management practices in term of Investing

CM Practices : Investing

WeightedMean

VerbalInterpretation

Rank

Spends cash for the repair and

maintenance of certain equipment.

3.8

Oftentimes

Invests on new equipment for the

business.

3.6

Oftentimes

Saves cash for possible expansion

of the business.

4.4

Oftentimes

Invests cash for business

expansion.

4.2

Oftentimes

The owner uses the cash to buy

his/her personal needs/wants.

2.6

Sometimes

Average weighted mean

3.72

Oftentimes

Table 11 shows the levels of cash management practices of the

respondents in term of investing. With a weighted mean of 4.4, and ranked asfirst, the respondents often save cash for the possibility of expanding theirbusiness. However, with a weighted mean of 2.6, and ranked as last, therespondents sometimes uses the cash to buy their personal needs and/or wants.

4. Test of significant relationship between the common problems

encountered and the levels of cash management practicesTable 12: Significant Relationship Between the Common Problemsencountered and Levels of Cash Management Practices in term ofForecasting

Variable df

Level ofSignificance

X2

CriticalVerbal2Value of x Interpretation

Decision

F1

40

0.05

43.099

55.758

Accept H0

Not Significant

F2

40

0.05

46.808

55.758

Accept H0

Not Significant

F3

40

0.05

54.177

55.758

Accept H0

Not Significant

F4

40

0.05

40.311

55.758

Accept H0

Not Significant

F5

40

0.05

43.003

55.758

Accept H0

Not Significant

Table 12 shows the test of significance between the common problems

encountered and the levels of cash management practices in term of forecasting.F1, F2, F3, F4 and F5 represent the five cash management practices underforecasting. The result of the computed chi square in all practices of forecastingwas lower than the critical value of chi square, which was 55.758, which meansthat the decision is to accept the null hypothesis. The common problems

encountered have no significant relationship with the levels of cash management

practices in term of forecasting.Table 13: Significant Relationship Between the Common Problemsencountered and the Levels of Cash Management Practices in term ofReceiving

Variable df

Level ofSignificance

X2

CriticalVerbalValue of x2 Interpretation

DecisionTable

R1

40

0.05

113.748

55.758

Reject H0

Significant

R2

40

0.05

55.379

55.758

Accept H0

Not Significant

R3

40

0.05

84.372

55.758

Reject H0

Significant

R4

40

0.05

69.539

55.758

Reject H0

Significant

R5

40

0.05

81.161

55.758

Reject H0

Significant

13showsthe testof

significance between the common problems encountered and the levels of cashmanagement practices in term of receiving. R1, R2, R3, R4 and R5 represent thefive cash management practices of receiving. The result of the test ofsignificance shows that the computed chi square for R1, R3, R4 and R5 washigher than the critical value of chi square which was 55.758. R1, R3, R4, and R5have a significant relationship with the common problems encountered in cashmanagement. However, the result of the computed chi square for R2 was lowerthan the critical value of chi square which means that the decision for R2 is toaccept the null hypothesis. R2 has no significant relationship with the commonproblems encountered in cash management.

Table 14: Significant Relationship Between the Common Problems

encountered and the Levels of Cash Management Practices in term ofDisbursing

Variable df

Level ofSignificance

X2

CriticalVerbal2Value of x Interpretation

Decision

D1

40

0.05

101.773

55.758

Reject H0

Significant

D2

40

0.05

93.081

55.758

Reject H0

Significant

D3

40

0.05

51.819

55.758

Accept H0

Not Significant

D4

40

0.05

66.524

55.758

Reject H0

Significant

D5

40

0.05

45.155

55.758

Accept H0

Not Significant

Table 14 shows the test of significance between the common problems

encountered and the levels of cash management practices in term of disbursing.D1, D2, D3, D4 and D5 represent the five disbursing practices. The result of thetest of significance shows that the result of the computed chi square for D1, D2,and D4 are higher than the critical value of chi square, which was 55.758, whichmeans that D1, D2, and D4 have a significant relationship with the commonproblems encountered. On the other hand, the result of the computed chi squarefor D3 and D5 was lower than the critical value of chi square which means thatD3 and D5 have no significant relationship with the common problemsencountered in cash management.

Table 15: Significant Relationship Between the Common Problems

encountered and the Levels of Cash Management in term of Controlling

Variable df

Level ofSignificance

X2

CriticalVerbal2Value of x Interpretation

Decision

C1

40

0.05

42.043

55.758

Accept H0

Not Significant

C2

40

0.05

66.524

55.758

Reject H0

Significant

C3

40

0.05

76.003

55.758

Reject H0

Significant

C4

40

0.05

53.982

55.758

Accept H0

Not Significant

C5

40

0.05

93.184

55.758

Reject H0

Significant

Table 15 shows the test of significance between the common problems

encountered and the levels of cash management practices in term of controlling.C1, C2, C3, C4 and C5 represent the five common practices of controlling. Theresult of the test of significance shows that the computed chi square for C2, C3and C5 was higher than the critical value of chi square which was 55.758 andtherefore verbally interpreted as reject the null hypothesis, C2, C3, and C5 havea significant relationship with the common problems encountered in cashmanagement. On the other hand, the result of the computed chi square for C1and C4 are lower than the critical value of chi square and therefore verballyinterpreted as accept the null hypothesis. C1 and C4 have no significantrelationship with the common problems encountered in cash management.

Table 16: Significant Relationship Between the Common Problems

Encountered and the Levels of Cash Management Practices in term ofInvesting

Variable df

Level ofSignificance

X2

CriticalVerbal2Value of x Interpretation

Decision

I1

40

0.05

58.867

55.758

Reject H0

Significant

I2

40

0.05

56.025

55.758

Reject H0

Significant

I3

40

0.05

93.796

55.758

Reject H0

Significant

I4

40

0.05

73.891

55.758

Reject H0

Significant

I5

40

0.05

47.431

55.758

Accept H0

Not Significant

Table 16 shows the test of significance between the common problems

encountered and the levels of cash management practices in term of investing.I1, I2, I3, I4 and I5 represent the five common practices under investing. Theresult of the test of significance shows that the computed chi square of I1, I2, I3and I4 has exceeded the critical value of chi square which was 55.758, whichmeans that is it significant. I1, I2, I3 and I4 have significant relationship with thecommon problems encountered in cash management. However, the computedchi square of I5 did not exceed the critical value and therefore is not significant.I5 has no significant relationship with the common problems encountered in cashmanagement.

Chapter 4SUMMARY, CONCLUSIONS, AND RECOMMENDATIONSThis chapter presents the summary of findings, conclusions drawn, andthe recommendations given by the researchers.Summary of findingsThe following were the summary of findings:1. Business profile of the Respondentsa) Form of businessNine out of ten respondents were sole proprietorship and only one wasa partnership, the former was the more common form of business ownershipin selected areas in Pangil, Laguna.b) Nature of the businessFive of the respondents were engaged in service, four were retailersand only one was engaged in manufacturing. Most of the respondents wereengaged in service; some of the them were computer shops, and smalleateries. Most of the respondents that were engaged in retailing owned sarisari store. The respondent that was engaged in manufacturing owned abakeshop.

c) Years in existenceFive of the respondents have been in business for 5 to 10 years, threeare in less than 5, one has been in business for 11 to 20 and one is morethan 21 years.d) Starting capitalNine out of the ten respondents had a starting capital of less thanP500,000, only one of the respondents had a starting capital within the rangeof P500,001 up to P1,000,000.e) Average monthly profitFive of the ten respondents had an average monthly profit within therange of P10,001 up to P25,000, three had less than P10,000, one had anaverage monthly profit within the range of P25,001 up to P40,000, and onerespondent had an average monthly profit of more than P55,000.2. Common problems encounteredThe respondents encountered cash management problems like havingcash overages and poor decisions in handling cash occasionally. Other problemslike having not enough cash for emergency expenses and necessary obligations,miscalculations and wrong allocations of cash, cash shortages, huge overheadcosts, and problems collecting receivables were seldom experienced by therespondents.

3. Cash management practices

a) Cash management in terms of ForecastingThe result of the investigation stated that the average weighted meanfor cash management practices in term of forecasting was 2.72, whichmeans that most of the cash management practices in forecasting were doneby the respondents occasionally.b) Cash management in terms of ReceivingThe result of the investigation showed that the average weighted meanfor cash management practices in term of receiving was 3.72, which meansthat the respondents often do most of the cash management practices whenreceiving cash, and the respondents always double check the amount theyreceived.c) Cash management in terms of DisbursingThe result of the study for the cash management practices in term ofdisbursing had an average weighted mean of 3.62, which means that therespondents often do most of the cash management practices whendisbursing cash.d) Cash management in terms of ControllingThe result of the study for the cash management practices in term ofcontrolling had an average weighted mean of 3.64, which means that the

respondents often do most of the cash management practices in controlling

their cash, and they always record their daily cash disbursements.e) Cash management in terms of InvestingThe result of the study for the cash management practices in term ofinvesting had an average weighted mean of 3.72, which means that therespondents often do most of the cash management practices wheninvesting cash. However, they only use their cash to buy their personal needsand/or wants occasionally.4. Significant relationship between the common problems encounteredand the levels of cash management practicesThe statistical tool that was used for testing the significant relationshipbetween the common problems encountered and the levels of cash managementpractices was chi-square. The test aimed to determine if there was a relationshipbetween the common problems encountered and the levels of cash managementpractices in selected small scale business establishments in Pangil, Laguna.In terms of forecasting, the computed chi square for all practices waslower than the critical value which means that the common problemsencountered have no significant relationship with the levels of cash managementpractices in term of forecasting.In terms of receiving, the result of the test of significance that wasmade in the second practice was not significant; the second cash managementpractice in terms of receiving had no significant relationship with the common

problems encountered. However, the result for the remaining four practices wassignificant which means that four practices have a significant relationship with thecommon problems encountered in cash management.In terms of disbursing, the result of the test of significance that wasmade showed that the first, second, and fourth practices of disbursing havesignificant relationship with the common problems encountered and the third andfifth practices have none.In terms of controlling, the result of the test of significance that wasmade showed that the first and fourth practices under controlling had nosignificant relationship with the common problems encountered; however, it alsoshowed that the second, third, and fifth practices had a significant relationshipwith the common problems encountered.In terms of investing, the result of the test of significance that was madeshowed that the first to fourth practices of investing had a significant relationshipwith the common problems encountered and the fifth had no.

ConclusionsThe following were the conclusions drawn from the findings:The cash management practices under forecasting have no significantrelationship with the common problems encountered. However, most of the cashmanagement practices under receiving, disbursing, controlling, and investinghave significant relationship with the common problems encountered. It is safe toassume that the common problems that the respondents encountered affect thelevels of their cash management practices.RecommendationsBased on the findings and conclusions of this study, it is observed thatthe common problems encountered by the respondents affect the levels of theircash management practices. The following recommendations were in order.It is recommended that the respondents must check then re-check andimprove their performances in term receiving, disbursing, controlling, andinvesting their cash. The respondents must not let the problems that theyencounter affect their cash management practices. However their performance inforecasting is good because it is not affected by the common problems that theyencounter.Regarding the common problems that they encounter, it is inevitableespecially in running a business and managing cash, it is recommended that theyprepare better for the problems that they may encounter in the future.